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View all search resultsGovt’s MSME credit push overlooks deeper structural problem
The government aims to boost bank lending to micro, small and medium enterprises (MSMEs) by raising the credit target from Rp 1.5 quadrillion (US$84.6 billion) to Rp 2 quadrillion in 2027, but doubts remain over whether the move will effectively address structural issues that have hindered lending to the sector.
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A participant arranges bags made during a fashion training program on May 14, 2024, in Denpasar, Bali. Twenty people from micro, small and medium enterprises (MSMEs) took part in the event organized by the Denpasar city administration. (Antara/Nyoman Hendra Wibowo)
T
he government aims to boost bank lending to micro, small and medium enterprises (MSMEs) by raising the credit target from Rp 1.5 quadrillion (US$84.6 billion) to Rp 2 quadrillion in 2027, but doubts remain over whether the move will help, given the structural issues that have hindered lending to the sector.
MSMEs Minister Maman Abdurrahman unveiled the plan on Aug. 21, saying there had been a request from the Office of the Coordinating Economy Minister to raise the credit target for MSMEs.
“It aims to improve access to bank loans for the MSME sector,” he said, as quoted by news agency Antara.
Outstanding bank credit totals around Rp 9 quadrillion, with some Rp 1.5 quadrillion of that allocated to the MSME sector, comprising Rp 300 trillion of subsidized microcredit program (KUR) and the remaining Rp 1.2 quadrillion in commercial loans.
Maman added that the government was assessing the financing structure should the MSME credit target be lifted to Rp 2 quadrillion for next year. He also said the government was mulling over increasing the portion of KUR.
However, he acknowledged that increasing small business financing would need to be accompanied by proper management and planning to avoid a rise in nonperforming loans (NPL). Therefore, he said, MSME players also needed support to ensure their products can access the market.
He went on to say that the government and other stakeholders should enhance both financing and market access for MSME players, ensuring they are able to absorb the additional financing.
